Class actions

A class action is a lawsuit or civil litigation initiated by a group of people. Class actions are sometimes called multi-plaintiff litigation. The plaintiffs in a class action generally share the same or similar grievances, such as personal injuries or economic losses resulting from the actions of a company or government. Their level of injury or amount of loss may differ, so while they take action together they may seek different amounts of damages. The plaintiffs in a class action combine to have their separate grievances heard in the same case. They may employ the same lawyers or they may have their own lawyers who collaborate.

Class actions have several advantages. They can help ‘free up’ the court system, allowing one case to deal with many individual disputes involving similar claims or sets of facts. Class actions also encourage individuals to have their disputes heard, since the legal costs are shared by all litigants. Class actions can help individuals feel less intimidated by the process of legal action and court hearings, particularly when the dispute involves claims large corporations, insurance companies or governments. Critics of class actions suggest they encourage a litigious culture, with lawyers actively seeking out claimants and cases for profit. Class actions may also minimise the contribution of individuals to their own legal action, while participants may receive fewer damages than they might as an individual litigant.

Some examples of class actions include:

In 2010 a litigation funding firm, IMF, announced that it was planning a series of class actions against Australia’s banks, to recover excessive charges for exception fees. This includes penalty fees of $20-60 charged for events such as late payments, overdrawn accounts and dishonoured cheques. It is estimated that banks collected $1.2 billion of penalty fees in 2008 alone. According to IMF, the basis for these fees is questionable and will be tested in its class action. IMF has set up a website (www.financialredress.com.au) inviting bank customers to participate in the class action.

In 2007 around 1,000 shareholders of the Australian Wheat Board Ltd. (AWB) launched a class action against the company. The class action came after AWB executives authorised dubious trade deals in Iraq, in breach of United Nations sanctions. The resulting poor publicity saw AWB share prices plummet, costing shareholders millions. In 2010 the company settled for $39.5 million.

In 2004 more than 50 people initiated a class action against the Old England Hotel in Heidelberg, Victoria, after they contracted salmonella from meals served there in late 2003 and early 2004. Some litigants spent up to a week in hospital recovering from the food poisoning. In 2006 the Federal Court awarded an undisclosed amount of damages to the group.

In 2003 a class action was launched against Pan Pharmaceuticals, which manufactured Travacalm, a travel sickness drug made from natural and herbal ingredients. All Pan products were withdrawn from sale by government regulators early in 2003 after consumers reported that Travacalm caused fainting, nausea, loss of muscle control and hallucinations. More than 100 Travacalm users were awarded damages. The negative publicity and the government’s widespread response caused Pan Pharmaceuticals to collapse. This has sparked a $165 million class action against the government by Pan’s suppliers and retailers.

In 1998 a class action was launched by shareholders of GIO, against GIO’s board of directors, for misleading and deceptive statements. The shareholders had been advised in a 1998 report to reject a takeover offer of $5.35 per share, which they subsequently did. GIO then lost $2 billion and shareholders were later forced to sell their stock at $2.75 per share. In 2003 the Federal Court awarded 22,051 shareholders a total of $97 million.

In 1988 Lois Jensen, acting on behalf of herself and fifteen female co-workers, launched a class action against Eveleth Taconite Company. The women alleged more than a decade of sexual harassment, abuse, intimidation and threats by male mine workers – as well as mine owners for failing to act upon their complaints. After several adverse rulings, the women were subsequently awarded $3.5 million on appeal. It was the first class action for sexual harassment in the United States and was portrayed in the Charlize Theron film North Country.