A class action is a lawsuit filed on behalf of all the people affected by some practice believed to be unlawful – anything from a defective medical device to a TAFDC regulation to a bank overcharge to a discriminatory hiring policy. The goal of the case may be to order the policy changed, get compensation for the people harmed by the policy, punish the people responsible for the policy, or all of the above. Rules of court allow a judge to “certify” a case as a class action if there are a large number of people affected in such a way that it would be more efficient to treat it as one big case than a lot of little cases. Once a case is certified as a class action, the actual people whose names appear on the case are required to act as representatives of the entire class – they can't hold out for just the best settlement for themselves.

Class actions are the only effective way to hold large companies responsible for their misconduct, especially financial misconduct toward consumers. If a company makes a million dollars by overcharging a million people by a dollar – or even 10,000 people by $100 -- none of those people are going to sue individually to get their money back. In a class action, lawyers can ask judges to order relief on behalf of all the people affected, except for those who individually choose to exclude themselves from the case.

Most class actions, like all kinds of lawsuits, are settled rather than tried. Unlike ordinary lawsuits, even if the parties' lawyers enter into an agreement, the judge has to analyze it and decide whether it is fair to the whole class. Still, the patterns characteristic of consumer class action settlements have generated controversy, some of it deserved. For example, a settlement might call for individual class members to get a credit toward future purchases from the defendant corporation. This may seem like a better deal for the company than the consumers, since it creates an incentive for the consumers to do more business with the company that supposedly mistreated them in the first place. If individual class members can't be identified or if the amount of money involved per person is very small, then instead of individual refunds, the defendant corporation might be required to make a donation to a consumer rights organization.

The plaintiffs' lawyers usually get a fee, paid by the defendants, proportional to the number of people in the class. Corporations that find themselves on the wrong side of class actions frequently point to large lawyers' fees as evidence that the system is out of control. But plaintiffs' lawyers don't get paid at all if they lose, unlike the lawyers who defend these cases on behalf of corporations and their insurance companies.

Some years ago conservative political organizations made class action “reform” part of their political agenda. In 1995, as soon as Republicans won control of Congress, one of the restrictions they placed on programs of legal services for the poor was a ban on class actions. In 2005 Congress passed and President Bush signed a bill designed to make class actions harder to bring and slower to dispose of. Its main provision lets defendants force most large class actions out of state courts and into federal court, even if they only involve violations of state laws. Because the federal courts are already overburdened, and because they now have to rule on unfamiliar bodies of law with no new resources, this will slow down the resolution of these lawsuits.

Many federal judges, including the notoriously conservative late Chief Justice of the Supreme Court, William Rehnquist, came out against the bill for this reason.

Yet many legislators who call themselves conservatives, who usually argue for limiting the reach of the federal government, voted very differently when business interests sought to trample over state laws and state courts. Why would people who claim they are defenders of federalism and limited government support bills like this one? It might have had something to do with the 350 registered Washington lobbyists pushing for this bill. Most of them represented industries that make large contributions to the election campaigns of members of Congress. They weren't hired by consumers like you and me.

The class action bill is far from the only example of this phenomenon. Over the past generation, Congress has also invoked the power of the federal government to prohibit state legislatures from passing stronger consumer protection laws, including caps on interest rates for mortgages and other consumer loans. This change alone has resulted in the upward redistribution of billions of dollars of wealth from working and middle-class people to the stockholders in banks and other lenders.

Standing firmly against the class action “reform” bill was a coalition of labor unions, public-interest law firms, and civil rights organizations united under the banner of the “Preserving Access to Justice Coalition.” This coalition lost the class action battle, but has become reenergized in the new Congress to take on other fights such as predatory lending and mandatory arbitration in consumer contracts. Stay tuned.