The Basics of Class Action
The class action rule is intended to improve court efficiency by allowing a large group of people with similar claims to join together in one lawsuit. One or more representatives of the harmed group go to court on behalf of everyone else who was similarly affected. If those representatives meet certain criteria, they are allowed to prove and settle not only their own claims, but the claims of everyone in the larger group as well.
A potential class action lurks whenever a company's actions harm lots of people. Class actions have been brought against the manufacturers and distributors of products as diverse as IUDs, computer monitors, asbestos and tobacco. aBusiness practices that harm consumers, such as overcharging for banking services or using misleading information to sell products ("You're already a winner, send in your magazine subscription to collect your prize"), have spawned class actions.
Shareholders can bring class actions against companies for poor management or misleading investment literature. Employees can sue employers collectively for discriminatory practices or for violating employment or benefit agreements.
Rule 23 of the Federal Rules of Civil Procedure usually governs class actions in federal courts. State courts have adopted similar rules with the same basic requirements.