Binding Nature of Class Actions


Class actions were developed in the twentieth century as a way of managing complex, multiparty litigation.  Initially, the concept was limited in two ways. First, the procedure applied only to equity cases.  In 1938 this scope was broadened by adoption of rule 23 of the Federal Rules of Civil Procedure to include all cases in law as well as equity.  Second, it was unclear if a judgment in a class action would bind unnamed parties.  This uncertainty remained until 1966, when rule 23 was amended to make it clear that unnamed parties were bound by a judgment in a class action.

Rule 23(b) (1), (2) and (3) of the Federal Rule of Civil Procedure governs the binding nature of class actions. 

Class actions brought pursuant to FRCP 23(b) (1) and (2) do not permit class members to “opt out” of the class.  Therefore, all class members, whether or not they participate, are bound by settlement or adjudication of the class action and may not bring individual suits on the matter.  In contrast, members of a FRCP 23(b) (3) action may opt out from the class upon timely notice to the court.  Members who exclude themselves from an action under 23 (b) (3) are not bound by the disposition of the class action and can bring their own action against the defendant.

For any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must clearly and concisely state in plain, easily understandable language among other things the binding effect of a class judgment on members under Rule 23(c) (3).