The Federal Appeals Court handed down a decision to throw out a massive $7.25 billion antitrust settlement between Visa, MasterCard, and millions of retailers. This serves as a great springboard for discussing the topic of class action lawsuits. This case involved accusations that the card networks were overcharging transaction fees in a monopolistic way. The Appeals Court found the settlement unfair to retailers who would gain little to no benefit.
What is a Class Action Lawsuit?
Class action lawsuits are legal proceedings where a group of people collectively bring a claim to court. These are typically used when individual cases are too small to be economically viable as separate lawsuits. In a class action, all individuals or entities that fall under a certain category (the class) are automatically considered plaintiffs. They usually have the option to opt-out if they don’t wish to participate.
To further drill down, the primary reason class actions exist is due to the economic impracticality of individual lawsuits. A single lawsuit, even a relatively straightforward lawsuit, can cost upwards of $10,000. This makes them unfeasible for small-scale claims. In large disputes like the one involving Visa and MasterCard, the costs can run into the millions of dollars. By pooling resources and claims, class actions allow these smaller, individual grievances to be addressed collectively.
Claim preclusion and issue preclusion are legal concepts that provide weight to class actions. Essentially, once the court makes a ruling in certain issues, such as negligence on the part of a company, other cases citing that same claim get almost automatically decided in favor of the plaintiff. Issue preclusion works roughly the same but deals with issues that were decided in a former case. Most class actions are small plaintiffs against a large corporate defendant. If the first case is won by the defense, the plaintiff team can learn what to do to sway a secondary case to their favor. The further down the line a plaintiff was, the more chances there are for claim preclusion or issue preclusion to enter the picture.
Class actions are a more elegant solution to this whole otherwise knotty process.
Decertification of a Class Action
In the Visa and MasterCard case, the court’s decision to decertify the class action means that it no longer recognizes the group of retailers as a collective plaintiff. This is problematic because it suggests that the damages or situations of each retailer are too varied to be grouped together. While it might be true that a large retailer like Walmart and a small local florist have different levels of damage and stakes in the lawsuit, the ruling poses a significant challenge.
Class action lawsuits play a vital role in the legal system, allowing individuals and smaller businesses to address grievances against large corporations that would otherwise be economically impractical to pursue. While they present challenges in terms of defining and managing the class, they are often the only viable route for seeking justice in cases involving widespread but individually small-scale damages.