ABA Section of Business Law

Regardless of how the justices came up with the idea to create a class action to settle once and for all the question of whether Otes could refuse payments tendered in the local money, that's what they did. Discart v. Otes perhaps has more in common with a modern class action than the other early cases do. Unlike the parishioners of Nuthampstead, the Channel Islanders did not start litigation as a group. Instead, like class members in a modern class action, they were formed into a group by judicial decree after the litigation started.

How did things turn out for this early class? The King's Council ruled in favor of Sir Otes and against the class — once and for all.

The early English examples of group litigation show at least as many defendant groups as plaintiff groups. Yeazell, "The Past and Future of Defendant and Settlement Classes in Collective Litigation," 39 Ariz. L. Rev. 687, 688 (1997). Yeazell cites Martin v. Parishioners, supra, as an early example of a defendant group, noting that the rector, the more powerful party, filed the bill against the parishioners.

Marcin cites the colorful case of Hilgay v. Wesnam, 10 Seld. Society 44 (No. 41, Ch. 1399) (1896) as another early example of a defendant group. Marcin, supra, at 519-520. In 1399, Simon Hilgay, parson of the church of Hilgay, brought a bill in chancery against Robert de Wesnam alleging that Wesnam and his evil minions were menacing him so that "he dare not, in this most holy time of Lent, approach his said parsonage to hear the confessions of his parishioners, for fear of unmerited death." Hilgay alleged that Wesnam and his confederates had chased him with "naked swords drawn, clubs and bucklers, from the town of Fincham in the County of Norfolk to the town of Crimplesham, which are two leagues distant, in order to have killed him."

Hilgay did name six of Wesnam's associates as respondents, but pleaded as grounds for relief in chancery that "considering that the said Robert Wesnam hath so many evil-doers associated and confederated with him, and is of such horrible maintenance," that Hilgay "could never come to his recovery against him and the others at common law." The chancellor commanded Wesnam and his confederates to appear before the King and his Council (not before the chancellor) to answer the bill. How many evil minions Wesnam actually had, and whether Hilgay got any relief from their menacing, are details that history appears to have forgotten.

The case most commonly cited as the first reported class action in English chancery court is Brown v. Vermuden (1676), 1 Ch. Cas. 272, 22 Eng. Rep. 796. Even if Brown v. Vermuden is not, as it is often cited to be, the first example of a "class action," it deserves recognition as the earliest reported case explicitly holding that the judgment in a class action is binding on absent class members.

The story of Brown v. Vermuden is set in mining country — Derbyshire, to be exact — in the late seventeenth century. As Marcin explains, it was a chaotic time in English history, in the wake of the "shuddering excesses of the Cromwellian interregnum" and of the Great Plague and the Great Fire of London.

The vicar of Worselworth "[found] his parish finances in desperate straits" and traced the problem to Derbyshire, where the miners were not paying their tithes. The vicar sued the miners, "assert[ing] title to one-tenth of the lead-ore output of the mines," and the miners named four representatives to defend the suit. They lost.

Along came Mr. Vermuden, a mine owner who was not one of the four representatives, who intervened in the litigation to argue that he was not bound by the judgment because he was not a party to the case and could not have appealed from the adverse judgment. The chancellor was unimpressed with Vermuden's argument and held that "If the Defendant should not be bound, Suits of this Nature, as in the case of Inclosures, Suit against the Inhabitants for Suit to a Mill, and the like, would be infinite, and impossible to be ended." Furthermore, the chancellor decided, Vermuden could appeal "though no Party nor privy ... because he is grieved by the Decree."

And thus it was that the English chancery held that absent class members were bound by the judgment in a class action. (What was settled more than 400 years ago in England, however, did not stay settled in America — but that's another story.)

Unlike many modern American classes, the early English classes were cohesive. Class members lived, worked and worshiped together. They were aware of the dispute and might even have played a part in selecting class representatives. In some senses, however, the modern American class action has departed little from its English roots. If the disputes at issue in Martin v. Parishioners, Discart v. Otes or Brown v. Vermuden arose in America today, they could no doubt be resolved in a class action.


The modern American class action evolved on the equity side of the courthouse. Rule 23, Fed. R. Civ. P., is descended from an equitable exception to the necessary party rule.

The U.S. Supreme Court promulgated its second set of Federal Equity Rules in 1842, adding a new rule that was interpreted by courts as providing for class suits. Rule 48 provided:

Where the parties on either side are very numerous, and cannot, without manifest inconvenience and oppressive delays in the suit, be all brought before it, the court in its discretion may dispense with making all of them parties, and may proceed in the suit, having sufficient parties before it to represent all the adverse interests of the plaintiffs and the defendants in the suit properly before it. But in such cases the decree shall be without prejudice to the rights and claims of all the absent parties.

Commentators were almost unanimous in saying that Rule 48 simply restated a pre-existing rule. But what rule? Considering the closing proviso, it appears that Rule 48 restated an exception to the necessary party rule that Justice Story, on circuit, had articulated in the 1820 case of West v. Randall.

Story explained the "general rule in equity, that all persons materially interested, either as plaintiffs or defendants in the subject matter of the bill ought to be made parties to the suit, however numerous they may be." He then stated that equity courts recognized exceptions to that general rule, and, when a bill purported to be on behalf of all interested persons, "the plea of the want of parties [would] be repelled." Id. at 722. Story did not, however, indicate that the decree in such a case would bind absent parties. Hence the closing proviso in Equity Rule 48.

Legal sentiment changed in the years following West v. Randall. Courts and legislatures perceived a need for a class action device that could bind absent class members.

In 1849, the New York assembly adopted the Field Code, the first big step away from common law rules of pleading and toward modern rules of civil procedure. The assembly provided for class suits by adding a provision to Field's recommended joinder rules. The class action rule under the Field Code was that "[w]hen the question is one of a common or general interest of many persons, or when the parties are very numerous and it may be impractical to bring them all before the court, one or more may sue or defend for the whole."

In 1853, the Supreme Court, in the landmark case of Smith v. Swormstedt, ignored the closing proviso of Federal Equity Rule 48 and held that the decree in a representative suit bound the absent class members. In 1912, the Supreme Court promulgated the third set of Federal Equity Rules. The court dropped old Rule 48 and its proviso and borrowed language from the Field Code for new Rule 38.

Despite the holding in Smith v. Swormstedt and the language of the new rule, doubt lingered concerning the binding effect of a decree on absent class members. In an apparent attempt to reconcile inconsistency in the case law, commentators developed a vocabulary for describing different types of class suits: They were either "true," "hybrid" or "spurious."

Generally speaking, a "spurious" class action was an "opt in" class action — the judgment in such an action did not bind absent class members unless they intervened in the action, which they could do after judgment. The judgment in a "true" class suit, which generally concerned a common fund or common property, bound all members of the class. A "hybrid" class action was somewhere in between, but exactly where varied from case to case.

In 1937, the Supreme Court adopted the Rules of Civil Procedure, merging law and equity. The advisory committee said that Rule 23, "Class Actions," was a "substantial restatement of Equity Rule 38." In its original form, Rule 23 did not provide a mechanism for giving notice to class members or for allowing them to opt out of a class action. It also did not say whether or when absent class members were bound by the judgment. The tripartite categorization of class actions as true, hybrid or spurious persisted, as did the confusion concerning the binding effect of the judgment on absent class members.

In 1940, in Hansberry v. Lee, the Supreme Court held that persons whose interests had not been adequately represented in a class action were not bound by the judgment. To hold otherwise would deprive the purported class members of due process, it reasoned. Thus, adequate representation is the touchstone of a binding class action — those who are not adequately represented are not part of the class and are not bound by the judgment.

After evolving slowly from an exception to the necessary party rule to a rule clearly providing for class suits, Rule 23 took a giant evolutionary leap in 1966. In that year, the Supreme Court amended Rule 23 to explicitly provide that a judgment in a class action binds all absent class members. The new rule sets forth requirements for class certification and includes procedures for notifying class members that the action is pending. It also replaces the "spurious," opt-in class with the controversial "(b)(3)" opt-out class.

In 1974, the Supreme Court, in Eisen v. Carlisle & Jacquelin, held that, in opt-out class actions, notice must be given to each member of the class who can be identified, even those whose claims are so small that it is unlikely they would opt out to pursue individual actions.

Rule 23 has changed little since 1966. In 1998, the Supreme Court added subdivision (f), which provides for permissive interlocutory appeals of decisions granting or denying class certification, but the other changes to the rule have been nonsubstantive.

As class action procedures evolved in the federal courts, those courts became less hospitable forums for class actions.

In the 1921 case of Supreme Tribe of Ben-Hur v. Cauble, the Supreme Court seemed to favor jurisdiction of class suits. In that case, the federal district court's jurisdiction was based on diversity of citizenship, but not all members of the class were diverse. The Supreme Court had held that the judgment bound all members of the class who were adequately represented — even those who were not diverse. The court explained that the district court had "ancillary jurisdiction" on the claims of the nondiverse class members.

Half a century later, the Supreme Court seemed to disfavor jurisdiction of class suits. In 1969, the court held in Snyder v. Harris that class members could not aggregate claims to meet the amount-in-controversy requirement for diversity jurisdiction. In 1973, in Zahn v. International Paper Co. , the court removed any doubt left after Snyder by holding that each class member's claim must meet the amount-in-controversy requirement for diversity jurisdiction. Thus, federal courts became unavailable for most consumer class actions.

The continuing vitality of Zahn is uncertain. In the Judicial Improvements Act of 1990, Congress combined the concepts of pendent and ancillary jurisdiction under the label "supplemental jurisdiction," which is codified at 28 U.S.C. 1367. There was no indication that Congress intended to change the Zahn rule, but the supplemental jurisdiction statute does not explicitly preserve it. In 1995, in In re Abbot Lab. , the U.S. Court of Appeals for the Fifth Circuit held that, under the plain meaning of the supplemental jurisdiction statute, the Zahn rule no longer applied.

The Abbot Lab court held that, in a class action in which the court's jurisdiction is based on diversity of citizenship, the court can exercise supplemental jurisdiction over the smaller claims of other class members as long as the class representative's claim satisfies the amount-in- controversy requirement.

The Supreme Court affirmed In re Abbot Lab in 2000 by an equally divided court. The court's one-sentence comment gives no additional guidance as to whether the supplemental jurisdiction statute allows federal courts to entertain class actions, in its diversity jurisdiction, in which not all class members' claims meet the amount-in-controversy requirement.

In the meantime, the Supreme Court's 1985 decision in Phillips Petroleum Co. v. Shutts had made state courts more viable forums for nationwide class actions. In that case, the court held that state courts can exercise jurisdiction over the claims of nationwide "opt out" plaintiff classes. Specifically, the court held that due process does not require out- of-state plaintiffs to "opt in" in order for their claims to come within the jurisdiction of the forum state's court.

However, the court in Shutts also held that the state court may not arbitrarily apply the law of the forum to all of the plaintiffs' claims; due process requires that the forum state have a "significant contact or significant aggregation of contacts" to claims in order to apply its own law to those claims. Thus, a state court with jurisdiction of a nationwide class action may have to apply different laws to the claims of different plaintiffs.

To say that class actions are controversial is to understate the obvious. Congress and state legislatures have reacted to some of the controversy by changing the rules for certain types of class actions, particularly in the last decade.

Congress enacted the Private Securities Litigation Reform Act of 1995 in response to controversy surrounding an increase in the number of class actions alleging federal securities law violations. The act supplements Rule 23 for such actions by requiring early notification to plaintiff class members and by addressing the selection of class representatives and counsel, attorney fees, and settlement procedures.

In 1996, President Clinton signed into law the Prison Litigation Reform Act of 1995, which, along with its amendments, limits the remedies available to prisoners alleging unconstitutional conditions in prisons and limits attorney fee awards for such actions.

Also in 1996, Congress began forbidding Legal Services Corp. fund recipients from participating in any welfare reform effort, including class actions challenging welfare laws. In 2001, however, in Legal Services Corp. v. Velazquez, the Supreme Court held that the funding ban was unconstitutional, reopening the door for LSC-funded entities to bring welfare- reform class actions.

Some of the current class-action controversy surrounds the so-called settlement class action, in which the would-be class representative reaches a settlement agreement with the would-be defendant before an action is ever filed, then files a class-action complaint and proposed settlement agreement simultaneously.

In 1997, in Amchem Products Inc. v. Windsor, the Supreme Court held that the federal district court erred by certifying, for purposes of settlement of a case that the parties did not intend to litigate, a huge, nationwide, class of plaintiffs who had been occupationally exposed to asbestos. The plaintiff class members included people who had manifested injuries from asbestos exposure as well as people who had been exposed to asbestos but who had not manifested any injuries.

The proposed settlement treated different types of plaintiffs in different ways, and there were inherent conflicts among the plaintiffs. The court explained that, although a proposed settlement is relevant to a decision on class certification because litigation management problems are obviated, a proposed settlement does not otherwise relax the requirements for class certification. Because of the inherent conflicts of interest among the plaintiffs and because of the many differences in their exposures and injuries, the court held that the class was not appropriate for certification according to Rule 23(b)(3).

The next change to Rule 23 is yet to be seen, but it will likely address settlement class actions in response to the Amchem decision.



Spence is an associate at Johnston Barton Proctor & Powell LLP, in Birmingham, Ala. Her e-mail is sts@jbpp.com.