The process of a class action case
There are many different types of class actions. The circumstances in which they arise and the courses they can take will differ greatly from case to case. However, there are a number of common steps or stages that most class actions will go through.
To help demystify the class action process, we’ve explained what happens during some of these steps below:
Wrongdoing occurs that affects a group of people in a similar way
After a loss or injury has been caused, a number of potential claimants (people affected by the issue) will generally seek legal advice about how best to seek to recover their losses or seek compensation for the harm they have suffered. Class action lawyers will identify where such circumstances affect larger groups of people, and can determine when pursuing a claim as a class action can be beneficial to the claimants involved.
Where a claimant is prepared to act as a 'representative plaintiff' (taking on the responsibility of running a claim on behalf of a wider group), a potential class action will generally be announced and other similarly-affected claimants will be invited to register their interest.
The claim is commenced in a Court
The legal team involved will usually spend significant time and energy investigating the potential claim in detail. This is to identify the aspects that are properly ‘common’ and which would be of assistance to the affected group to have determined on a class-wide basis. This work informs the initial court documents that are filed to formally begin a class action, and involves detailed consideration of how best to configure the case. This is so it can be sustained as a class action and not be vulnerable to attacks from defendants.
After the case is commenced and brought to the attention of the defendant(s) involved, the Court will generally organise an initial hearing within a few weeks. Here, any preliminary issues concerning the case will be raised and an initial timetable for the case will be put in place.
Pleadings and other court documents to define the case are finalised
After the representative plaintiff’s claim is filed, the defendants have an opportunity to set out their defence to the allegations raised, and the plaintiff has a chance to respond to any matters raised in the defences filed, if appropriate. While this is happening, the parties also have the opportunity to seek more detail about any of the allegations or defences made, so they can properly understand the claims and defences that are being raised.
At the conclusion of this process, which can often take several months, the court documents that define the boundaries of the case will generally be ‘closed’. The parties would need to seek the Court’s permission to amend those documents after that time.
Often, though not always, this will also be the point at which a defendant will seek to attack a class action by arguing that it should not continue as a group-based proceeding. They will often do this on the basis that the common issues are not significant enough to warrant the claim continuing as a class action. They may also claim that the costs of running the claim as a class action would be greater than pursuing group members’ claims individually. Often these arguments are able to be overcome by representative plaintiffs, but if class actions have not been designed carefully enough – particularly if inexperienced class action lawyers are involved – defendants can sometimes succeed in stopping class actions at this stage.
If a case survives to this point, however, the parties and the Court will generally start to consider the next stages of the case in more detail.
Group members have a chance to opt out
Up until this stage, the case has been brought on behalf of all parties who satisfy the group definition in the court documents, regardless of whether they know about the claim or not.
Once the parameters of the claim have been sufficiently well-defined, the Court will order that a notice be publicised to bring the commencement of the proceeding to the attention of group members, and to notify them of their right to opt out of the case if they wish to.
This opt-out notice will explain the nature of the claim that has been brought on group members’ behalf. It will also set out in detail the options that group members have to remove themselves from a claim by opting out, if they wish to do so, and how they can do this.
As part of this process, the Court will set a date by which any decisions about opting out will need to be made. After this date, anyone who has not opted out will remain a group member in the case, unless they make a specific application to be granted extra time to opt out of the case.
Evidence is compiled as the claim is prepared for trial
Once the court documents defining the case are finalised, the parties exchange relevant information that they have about their cases, in a process known as ‘discovery'. As part of this process, the representative claimant will gain access to the documents held by the defendants that are relevant to the claims and allegations made in the case. This can often be in the order of tens or hundreds of thousands of documents, which need to be analysed in order to assess how they fit in with the claim being pursued.
Similarly, the defendants will also gain access to the relevant documents and records held by the representative claimant about their claim as part of this process. Depending on the claim being made, this might involve their financial records or medical records and reports. Usually evidence from individual group members is not considered or exchanged as part of this process, as the class action is ordinarily pursued by reference to the representative plaintiff’s claim.
While this work is going on, the lawyers for all parties will interview witnesses, commission and obtain expert reports, and collate relevant documents, in order to prepare the case for trial. There may also be a number of applications made to the Court for particular kinds of orders or other arrangements to be made concerning the case while this work is ongoing. Depending on the size and complexity of the case, this process can take many months, or even a year or more, to complete.
If appropriate, a mediation or other discussions between the parties can take place
Courts generally encourage the parties to a dispute to try to resolve claims through negotiation or other forms of alternative dispute resolution, before they proceed to trial. This is particularly important in class actions, where trials can often take up many weeks or months of Court time and resources.
For this reason, it is not uncommon for a Court to order that the parties attend a mediation before a class actions proceeds to trial. A mediation is a confidential discussion between the parties’ legal representatives, facilitated by an independent mediator. Here, the parties can seek to resolve the claim if appropriate. At or before the mediation, the parties will exchange information about what they see as the strengths and weaknesses of each other’s cases. This is so they can assess the likely value of the claim and the risks that each party faces more accurately, which can assist in conducting any settlement negotiations.
A mediation can occur at any stage of a case if the parties agree to participate in it. However, in most class actions it will generally occur after evidence has been exchanged and when a trial date has been set. By this stage the parties will generally be quite familiar with each other’s cases and will be able to assess the risks and value of the claim more accurately.
If a settlement agreement is not reached, the claim will proceed to trial
The trial of a class action will generally be conducted to resolve the representative plaintiff’s individual claim, but will also be used to resolve a set of questions (identified in advance) that arise in many or all other group members’ claims. The answers to these questions will apply in all other group members’ claims, meaning they do not need to be re-litigated in every claim, and depending on the answers reached by the Court, they can heavily influence the prospects of the case settling.
Trials in many class actions are long and complex, and can often take weeks or months to complete, depending on the complexity of the case and the volume of evidence and legal submissions involved.
After a trial is concluded, the answers to the common questions applying to all group members will be known. If these are sufficiently clear that all parties have a sense of what the outcome of other group members’ claims will be, then this can often lead to further negotiations resulting in a settlement agreement. Otherwise, it may be necessary for some other group members’ claims to be determined before there is sufficient certainty to allow a settlement to be reached. Any subsequent claims will not need to re-consider the answers to the common questions that have already been determined.
Once a settlement agreement has been reached, group members will be notified and a timetable put in place for any objections or submissions to be made ahead of a hearing
A Court-approved notice will be publicised and sent to all group members who have registered their interest or participation in the class action. The notice will set out the basic terms of the settlement, how it will affect group members, and how group members can find out more information about it.
The notice will also detail how group members can respond to the proposed settlement. Responses can include filing an objection to it if they disagree with the proposed terms of the resolution, or by registering to participate in any settlement if it is approved by the Court.
When making orders on this notice, the Court will usually also set out a timetable for the representative plaintiff to also file legal submissions and affidavit material concerning the proposed settlement, to enable the Court to ultimately consider whether to approve it.
After the deadline for any objections from group members has passed, the Court will hold a hearing concerning whether to approve the proposed settlement.
In the course of this hearing, the Court will consider all material that has been filed, and will ultimately seek to determine whether the settlement is a fair and reasonable resolution of the claim. They will also determine whether it has been reached in the interests of the group members.
If the settlement is approved, a settlement distribution scheme will be implemented
As part of the settlement orders, the Court will generally also make orders approving a settlement distribution scheme. This is a document setting out a series of processes and rules governing how settlement funds should be distributed amongst group members in a class action. The Court will also appoint a company or law firm to act as the administrator of this scheme. This will often, but not always, be the representative plaintiff’s lawyers, since they usually know the group members’ claims best and will be best placed to assess and pay out claims the most efficiently.
After these orders have been made, the administrator of the scheme will act to implement the terms of the settlement distribution scheme as approved by the Court, to assess how much each group member is entitled to receive from the settlement, and then to pay that amount to each group member as efficiently and fairly as possible. Group members may be required to provide some evidence or supporting material as part of this process in order to substantiate their claims. Although, if they have contacted the representative plaintiff’s lawyers previously, this work will often have been done already and can be re-used.
While this settlement administration work is ongoing, the administrator will report back to the Court regularly, and the Court will continue to supervise the process to ensure it is being conducted efficiently and appropriately until it is completed.