A federal class action is a civil lawsuit in which one or a few named plaintiffs sue in federal court on behalf of a much larger group of people who share similar legal claims against the same defendant. The case is governed by Rule 23 of the Federal Rules of Civil Procedure, and once a judge formally certifies the class, the court’s judgment or approved settlement binds every member of the group, whether or not they ever heard of the case. The appeal is efficiency: instead of thousands of separate suits producing inconsistent results, one proceeding resolves the dispute for everyone.
That efficiency comes with structure. A plaintiff cannot simply label a complaint a class action and proceed. The court has to decide, after a close look at the evidence, that the case meets Rule 23’s requirements. Only then does the lawsuit represent anyone beyond the people who filed it.
How a Case Lands in Federal Court
Federal courts hear class actions in two main ways. Some belong there from the start because the claims arise under federal law, such as securities fraud, employment discrimination, or federal privacy statutes. Others get there under the Class Action Fairness Act of 2005, which gives federal courts jurisdiction over most large, multistate class actions where the combined claims exceed $5 million, the proposed class has at least 100 members, and at least one plaintiff and one defendant are from different states.
CAFA was Congress’s response to complaints that state courts favored plaintiffs in large consumer cases. Under its removal provision, any single defendant can move a qualifying case from state to federal court without the consent of the other defendants, and the usual one-year removal deadline doesn’t apply. CAFA carves out some genuinely local disputes: if more than two-thirds of the class and the primary defendants are citizens of the state where the case was filed, the federal court must decline jurisdiction. Between one-third and two-thirds, the court has discretion to send it back. Suits against state governments, cases involving covered securities, and internal corporate governance disputes stay outside CAFA entirely.
A separate CAFA provision reaches “mass actions,” which are consolidated lawsuits involving 100 or more individual plaintiffs rather than a certified class. Those are a different mechanism, with their own rules; each plaintiff’s claim in a mass action must independently exceed $75,000 to stay in federal court.
What Plaintiffs Must Prove to Certify a Class
Rule 23 imposes four threshold prerequisites that every proposed class must satisfy, and the plaintiffs carry the burden of proof. Courts evaluate certification by a preponderance of the evidence and conduct what the Supreme Court has called a “rigorous analysis,” resolving factual disputes along the way even when those disputes overlap with the merits.
The four prerequisites under Rule 23(a) are:
- Numerosity. The class must be large enough that joining every member individually would be impracticable. Courts often treat 40 or more members as sufficient, though smaller groups can qualify depending on circumstances.
- Commonality. Class members must share common questions of law or fact, and after Wal-Mart Stores, Inc. v. Dukes (2011), those common questions must be “capable of classwide resolution” so that a single answer resolves a central issue for every member’s claim. Shared grievances alone are not enough.
- Typicality. The named plaintiffs’ claims must be typical of the rest of the class, both in legal theory and in the underlying facts.
- Adequacy. The named plaintiffs and their lawyers must be able to fairly and adequately protect the interests of every class member, with no conflicts that could compromise the representation.
The Three Categories Under Rule 23(b)
Clearing the four prerequisites is only half the task. The case must also fit into one of three categories:
- Rule 23(b)(1) covers situations where separate lawsuits would risk inconsistent rulings imposing incompatible obligations on the defendant, or where individual judgments would effectively exhaust the rights of absent parties. A “limited fund” case, in which there is not enough money to pay everyone fully, is the classic example.
- Rule 23(b)(2) applies when the defendant has acted on grounds that affect the whole class uniformly and a court order directing the defendant to do or stop doing something is the appropriate remedy. Civil rights cases seeking to change a company’s or agency’s practices are the typical use.
- Rule 23(b)(3) is the category used for the large consumer, securities, and antitrust cases that generate most headlines. The court must find that common questions “predominate” over individual ones and that a class action is the superior method for resolving the dispute fairly and efficiently.
The category matters for your rights as a class member. In (b)(1) and (b)(2) classes, members generally cannot opt out and are bound by the outcome. In (b)(3) classes, the court must send individual notice to every identifiable member and give each person the right to exclude themselves and preserve the ability to sue on their own.
The Supreme Court reinforced the division in Dukes, holding unanimously that claims for individualized monetary damages like backpay cannot be certified under (b)(2). Those claims have to proceed under (b)(3), with its notice and opt-out protections intact.
The Certification Process
Rule 23 instructs courts to rule on certification “at an early practicable time,” but in practice the process usually unfolds over many months. The plaintiffs file a motion backed by evidence and legal argument. The defendant opposes it. The court holds its rigorous analysis of each Rule 23 requirement and then issues an order either certifying the class or denying the motion.
If certification is granted, the order must define who is in the class and formally appoint class counsel. If it is denied, the proposed class dissolves and each person has to pursue their own claim individually. Because individual claims in consumer and employment cases are often too small to justify standalone litigation, a denial can effectively end the dispute. That is why certification is frequently the most important ruling in the entire case.
Certification orders aren’t final. The court can modify or revoke them as the case develops, and either side can ask the appellate court for permission to challenge a certification ruling before the case is over. Rule 23(f) sets a 14-day deadline to file that petition.
Settlements and Court Approval
Most certified class actions end in settlement rather than trial. Unlike ordinary lawsuits, class action settlements require court approval, because the named plaintiffs and their lawyers are making binding decisions for people who are not in the room.
Approval typically has two stages. At the preliminary stage, the parties present the proposed deal and the court evaluates whether it’s likely to pass muster and, if so, orders that notice be sent to the class. At the final stage, the court holds a fairness hearing at which class members, objectors, and sometimes government entities or nonprofits can weigh in. Before approving, the court must find the settlement “fair, reasonable, and adequate.”
The 2018 amendments to Rule 23 spelled out the factors courts weigh at final approval: whether class counsel and the named plaintiffs adequately represented the class; whether the deal was negotiated at arm’s length; whether the relief is adequate given the costs, risks, and delays of continuing to trial; and whether class members are treated equitably relative to one another. The court must also scrutinize the proposed attorney fee award, including when it will be paid.
Class members have the right to object, and objections must be specific. The 2018 amendments cracked down on “professional objectors” who used meritless objections as leverage for side payments; now no payment for withdrawing an objection or dropping an appeal is permitted without court approval following a hearing.
Settlement classes still have to meet Rule 23’s requirements. The Supreme Court made that clear in Amchem Products v. Windsor (1997), holding that a settlement cannot serve as a shortcut around the structural protections designed to safeguard absent class members. The only Rule 23 factor a court may set aside for a settlement class is “manageability,” since no trial will occur.
When Settlement Funds Go to Nonprofits
When settlement money cannot practically be distributed to individual class members, courts sometimes direct the funds to nonprofit organizations whose work is thought to benefit the class indirectly. These are called cy pres awards, from a Norman French phrase meaning “as near as possible.” The practice is controversial. Critics argue that cy pres-only settlements provide no real compensation to the people the lawsuit was supposed to help while attorneys still collect substantial fees. In Frank v. Gaos (2019), the Supreme Court declined to rule on the legality of cy pres and sent the case back on standing grounds. Justice Thomas wrote in dissent that cy pres payments should not count as class relief and that such arrangements raise serious concerns about adequacy of representation. The law in this area remains unsettled.
Class Counsel, Fees, and the Named Plaintiffs
When a court certifies a class, it must appoint class counsel under Rule 23(g). The selection turns on the lawyer’s experience with class actions and complex litigation, knowledge of the relevant law, resources the firm can commit, and work already done investigating the claims. If multiple firms compete, the court picks the one best able to represent the class.
Attorney fees in class actions are awarded by the court under Rule 23(h). Two main methods are used: the percentage-of-fund method, which gives counsel a percentage of the total class recovery, and the lodestar method, which multiplies hours worked by a reasonable hourly rate, sometimes with a multiplier. Many courts use a hybrid, setting a percentage fee and cross-checking it against the lodestar figure. The overall mean fee-to-recovery ratio runs around 23 to 24 percent, and the percentages tend to shrink as the total recovery grows. The Ninth and Eleventh Circuits use 25 percent as a benchmark in common fund cases; the Second Circuit rejects fixed benchmarks and insists on case-by-case analysis.
Named plaintiffs who serve as class representatives take on duties beyond those of ordinary class members. They work with attorneys on strategy, sit for depositions, and may have to approve or reject settlement offers that bind the entire class. In most circuits, courts approve “incentive awards” to compensate them for the time and risk involved, typically ranging from a few thousand to tens of thousands of dollars. The Eleventh Circuit, however, categorically banned incentive awards in Johnson v. NPAS Solutions (2020), holding that 19th-century Supreme Court precedent prohibits them. The First, Second, and Ninth Circuits have explicitly rejected that reading, and the Supreme Court declined to resolve the split in 2023.
How Class Actions Differ From MDLs
Class actions are often confused with multidistrict litigation, but they are separate mechanisms. An MDL, authorized by 28 U.S.C. ยง 1407, consolidates related federal cases from around the country before a single judge for pretrial proceedings only. The Judicial Panel on Multidistrict Litigation, a seven-judge body designated by the Chief Justice, decides which cases to transfer and where.
A class action merges individual claims into a single case with one judgment that binds everyone. An MDL keeps cases separate but coordinates their pretrial work. Many MDLs contain putative class actions alongside individual lawsuits, and the transferee judge may certify a class within the MDL. But many MDLs never achieve class certification. Instead, the judge may select individual cases for “bellwether trials” to test how juries respond to the evidence, giving both sides information for settlement talks. MDLs now account for more than half of the entire federal civil caseload, with antitrust and product liability cases making up the largest share.
What the Current Landscape Looks Like
Federal class action filings have surged. More than 12,200 class action cases were filed in federal court in 2025, roughly a 25 percent increase over the prior year and the highest total in at least a decade. By another count, filings exceeded 13,000, averaging more than 36 new cases per day. Corporations paid over $70 billion in class action settlements that year, a record figure.
Consumer protection cases dominate the docket, accounting for nearly half of all filings over the past decade. Consumer filings alone exceeded 7,600 in 2025, a nearly 50 percent jump from the prior year. Data privacy and cybersecurity class actions have been the fastest-growing segment, surpassing 1,800 filings in 2025, a 200 percent increase since 2022. Much of that growth comes from claims under state wiretapping statutes and the federal Video Privacy Protection Act targeting tracking pixels, session-replay tools, and analytics software on websites.
Securities class actions moved in the opposite direction, with only 205 federal filings in 2025, down from 222 the prior year and the lowest total since 2022. Pharmaceutical and biotechnology companies were the most frequent targets, followed by technology firms.
Judges granted more than 68 percent of class certification motions in 2025. Certification and settlement typically occur more than two years after filing, while the rare case that reaches trial takes closer to four years.
Unsettled Questions That Affect Outcomes
Several fundamental issues in class action law remain unsettled because different federal circuits have reached different conclusions and the Supreme Court has not stepped in. The most consequential is whether a damages class may include uninjured members. The Court had the question in Laboratory Corporation of America Holdings v. Davis (2025) but dismissed the case as “improvidently granted” without deciding it. Justice Kavanaugh dissented alone, arguing that common questions cannot predominate in a class mixing injured and uninjured people and warning that overbroad classes coerce businesses into settling.
The dismissal left a significant circuit split in place. The Ninth, Seventh, and Eleventh Circuits permit certification even when more than a trivial number of class members may lack injury. The D.C. and First Circuits require the number of uninjured members to be minimal. The Second and Eighth Circuits prohibit certifying any class that includes members without Article III standing. Other open questions include whether a full Daubert hearing on expert testimony is required at the certification stage and, as noted, whether incentive awards to named plaintiffs are permissible at all.
Reform efforts are also active around third-party litigation funding, in which outside investors finance class actions in exchange for a share of the recovery. The U.S. Government Accountability Office has described the practice as a multi-billion-dollar industry operating without uniform federal disclosure requirements. The Advisory Committee on Civil Rules agreed in October 2025 to continue studying whether a new federal rule should mandate disclosure. Individual courts have moved on their own: the Northern District of California’s Local Rule 3-15 requires disclosure of funding agreements, and a magistrate judge in the Uber multidistrict litigation ordered compliance with that rule.
Until these questions are resolved, where a class action is filed can shape the outcome as much as the facts of the case itself.