Class Actions Radar: United States

The landscape

Companies are facing more class action litigation in the past few years than ever before, particularly in the areas of consumer fraud, labor and employment, and securities.

Antitrust and product liability also comprise a significant percentage of class action filings, and data privacy class actions have been on the rise as companies increasingly face security incidents and new legislation is enacted.

Over the past decade or so, the Supreme Court has imposed higher standards for class certification and standing to sue in federal court, as described more fully below. Defendants have leveraged these decisions to develop defenses and defeat these cases at the class certification or dismissal stages.

Collective litigation in the US – What you need to know

1. Class action hotspots: There has been a surge in cases across consumer fraud, labor, securities, antitrust, product liability, and data privacy.
2. Landmark legal shifts: Supreme Court rulings have raised the bar for class certification and standing.
3. Emerging risks: Tech, data, and AI are driving new class action trends
4. Regulatory impact: Regulators shape class actions – both as a shield and a sword.
5. Compliance essentials: Stay current, audit programs, and manage AI risks.

Current developments

Class actions have been on the rise since the federal class action mechanism, Federal Rule of Civil Procedure 23, was amended and many courts thereafter leniently applied the Rule's requirement that issues common to the class predominate over individualized issues. 

For example, responding to the fact that the element of reliance on an alleged false statement is an inherently individualized inquiry, securities class actions increased in the 1990s after the U.S. Supreme Court established the “fraud on the market” rebuttable presumption of investor reliance on alleged fraud. This spawned judicially created presumptions of class-wide reliance by some courts in other contexts, including in putative class actions brought under state consumer fraud statutes alleging false labeling, which in turn have proliferated. More recently, however, the Supreme Court imposed higher evidentiary standards for class certification under Rule 23. In Walmart Stores, Inc. v. Dukes  (2011) the Supreme Court held that courts must engage in a “rigorous analysis” before certifying a class action and plaintiffs must prove “in fact” that the elements of Rule 23 are met, including that class representatives “suffer the same injury” as the class members they seek to represent; merely reciting questions common to the class is insufficient. In Comcast Corp v. Behrend (2013), the Court held that a plaintiff must proffer “evidentiary proof” of an expert damages model that measures only the damages attributable to plaintiff's specific theory of liability. 

Even more recently, the Supreme Court created further obstacles to class certification in the context of requirements to establish standing to sue in federal court under Article III of the U.S. Constitution. In Spokeo v. Robins (2016), the Supreme Court held that not every violation of law will confer standing under Article III; merely abstract or procedural harms do not suffice. In TransUnion v. Ramirez (2021), the Supreme Court expanded the scope of Spokeo by confirming that “every class member must have Article III standing in order to recover [ ] damages.”

These decisions create grounds for powerful class certification defenses. The Supreme Court also paved the way for companies to avoid class actions altogether in AT&T Mobility LLC v. Concepcion (2011) and more recently in Epiq Systems Corp. v. Lewis (2018), holding that class action waivers in arbitration agreements are generally enforceable. While there have been federal legislative efforts to limit or ban class action waivers in certain consumer, antitrust, employment and civil right disputes, none have yet passed.

Future trends

Absent further action by the Supreme Court or Congress, we anticipate that class actions will continue to comprise a significant portion of new lawsuits filed in federal court and that new kinds of claims, particularly in the technology, data and privacy space, will emerge as these industries evolve including with the advent of artificial intelligence and recent related state laws.

Regulatory bodies play an important role in the class action landscape in the US as regulatory action is used as both a sword and a shield, particularly in consumer class actions alleging false advertising. The doctrine of federal preemption – namely, that federal law preempts state law that conflicts with it – is a powerful defense in class actions alleging violation of state consumer fraud laws where, for example, a regulator promulgated a rule that permits the challenged conduct. By contrast, regulatory enforcement actions, as well as non-compliance with regulatory guidance or rules, have been used by plaintiffs to attempt to meet their burden of alleging that certain advertising is false or misleading. 

Regulators have also started to codify specific cybersecurity measures that businesses in certain sectors must implement, including banking, finance, and publicly traded companies. Class action plaintiffs will use any lapse in applying these specific measures to support a claim that the business failed to adequately protect their personal data.

Next steps for business

Stay informed:  Businesses should monitor the class action, legislative and regulatory landscape in the jurisdictions in which they operate and stay nimble as relevant claims emerge against similarly situated companies.

Conduct risk assessments:  Businesses should regularly conduct legal risk assessments including before launching a new initiative or introducing a new advertising campaign or product. Securing expert legal counsel can help businesses navigate the rapidly-evolving class actions landscape, and a robust risk assessment is critical to identifying potential legal vulnerabilities early, and helping businesses develop informed strategies to minimize the risk of future litigation.

Monitor compliance practices:  Businesses should routinely check the pulse on their internal practices to ensure that they are current with regulatory, legislative, and judicial changes on both the local and federal level. Outside counsel with expertise in relevant areas can assist with the creation and audit of compliance programs, as well as assisting with compliance itself to help mitigate the risk of class action litigation.

Understand AI risk:  The use of artificial intelligence is especially fraught with risk, from both existing laws that affect AI use and emerging AI-specific laws. At minimum, businesses should implement policies that govern AI use in the workplace to mitigate these risks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.