The class action in United States federal courts traces its origins to the 19th century, where representative suits were permitted when joinder of all interested parties was impracticable. The original version of the rule governing federal class actions, Federal Rule of Civil Procedure 23 (“Rule 23”), was adopted in 1938. It loosely categorised class action lawsuits into “true”, “hybrid” and “spurious” actions – labels that generated confusion and inconsistent treatment.

Rule 23 underwent a major reform in 1966, when it was comprehensively rewritten into its modern structure. Most notably, the reform distinguished between three categories of class actions:

• class actions necessary to avoid the risk of inconsistent or prejudicial adjudications;
• class actions seeking injunctive or declaratory relief; and
• most common, class actions seeking monetary damages.

This 1966 revision transformed class actions from a rarely used procedural relic into a powerful tool for aggregate litigation, particularly in civil rights, consumer protection and securities law cases. Subsequent decades saw first expansion and later retrenchment, including:

• the enactment of the Class Action Fairness Act of 2005, which channels large multistate class action suits from state courts into federal courts; and
• the US Supreme Court imposing stricter class certification standards in cases such as Wal-Mart Stores, Inc. v Dukes, 564 U.S. 338 (2011) and Comcast Corp. v Behrend, 569 U.S. 27 (2013).

New York followed a parallel but later trajectory. Historically, representative actions in New York were governed by a provision dating back to 1849, allowing suits “when the question is one of a common or general interest of many persons”. However, the modern New York class action did not take shape until the enactment of Article 9 of the New York Civil Practice Law and Rules (CPLR) (“Article 9”) in 1975. New York legislators modelled Article 9 on the Rule 23 reforms in 1966. But they intentionally made New York’s rules more flexible by omitting the rigid framework of three categories of class actions.

Under federal law, class actions are authorised by Rule 23, one of the courts’ procedural rules. Under New York law, class actions are authorised by Article 9, a statute.

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Under federal law, litigants can seek collective redress by filing a class action complaint pursuant to Rule 23 of the Federal Rules of Civil Procedure. The named plaintiff must satisfy four prerequisites set forth in Rule 23(a) – numerosity, commonality, typicality and adequate representation. This requires a litigant to show that:

• the class is so numerous that it would be impracticable to join each class member in the litigation;
• the class members’ claims share common issues of law and fact that merit common consideration by the court;
• the proposed class representative’s claims are typical of the class’s claims; and
• the class representative and class counsel will adequately represent the class. Rule 23(a) “effectively ‘limit[s] the class claims to those fairly encompassed by the named plaintiff’s claims’” (General Telephone Co. of Southwest v Falcon, 457 U.S. 147, 156 (1982)) (citation omitted).

Rule 23(b) identifies three types of federal class actions:

• mandatory class actions necessary to avoid the risk of inconsistent or prejudicial adjudications;
• mandatory class actions seeking injunctive or declaratory relief; and
• most commonly, class actions seeking monetary damages.

Monetary damages class actions require a litigant to further establish that (i) a class action is “superior” to other methods of adjudication and (ii) common questions of law and fact “predominate” over individualised questions.

New York state court class actions are governed by Article 9 of New York’s Civil Practice Law and Rules. There are numerous similarities between Rule 23 and its New York state analogue, as Article 9 was modelled on the modern Rule 23. The most significant difference is that New York’s Article 9 does not provide three categories of class actions with different additional statutory requirements, but instead requires litigants to merely show that a class action is a “superior” method of adjudication in comparison to the alternatives. New York courts have traditionally interpreted Article 9 liberally in favour of class certification, particularly for consumer protection and wage claims.

While there are no explicit prohibitions on the legal claims that a litigant may seek to have certified in a class action, there are practical limitations. For example, courts may be reluctant to certify a class of legal claims for damages arising out of fraudulent oral misrepresentations if the putative class members were told different things by different people, and suffered different harms, such that individual issues of fact and law predominate over common ones.

The US Supreme Court described class actions as a procedural device that “enables a federal court to adjudicate claims of multiple parties at once, instead of in separate suits” (Shady Grove Orthopedic Assocs., P.A. v Allstate Ins. Co., 559 U.S. 393, 408 (2010)). It is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only” (Wal-Mart Stores, Inc. v Dukes, 564 U.S. 338, 348 (2011)) (citation omitted).

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A class action begins when one or more plaintiffs file a class action complaint in federal or state court on behalf of a class of similarly situated plaintiffs. The class action complaint must include specific class action allegations and a class definition that precisely describes whose legal claims would be adjudicated in the action. If more than one plaintiff seeks to represent the same class of litigants (or an overlapping class), the court must appoint a lead plaintiff (ie, class representative) to oversee the litigation until the court rules on whether the case can proceed as a class action. Litigation then advances normally through dispositive motion practice, discovery and depositions, similar to how typical bilateral cases prepare for trial.

In class action litigation, however, the lead plaintiff files a motion for class certification prior to trial, seeking a court order appointing them as the class representative. The deadline for motions for class certification is set by the court, usually during discovery. The federal rules require that a motion for class certification be filed at “an early practicable time” (Rule 23(c)(1)(A)).

This lead plaintiff’s class certification motion must satisfy the requirements set forth in Rule 23 in federal court litigation or Article 9 in New York state court litigation. Federal class actions under Rule 23 must satisfy a two-step certification analysis. First, the plaintiff must satisfy the four prerequisites of Rule 23(a): numerosity, commonality, typicality and adequacy of representation. If those are met, the action must also fit within one of the three categories of Rule 23(b): (b)(1) for risk of inconsistent adjudications, (b)(2) for injunctive or declaratory relief or (b)(3) for damages actions where common questions predominate and a class action is superior to individual suits. The motion for class certification must be supported by evidentiary submissions, and federal courts apply a “rigorous analysis” standard, sometimes requiring mini-merits inquiries to test whether the Rule 23 requirements are truly met (Wal-Mart Stores, Inc. v Dukes, 564 U.S. 338, 350–51 (2011)).

Once certified, Rule 23(b)(3) classes for monetary damages require notice to the other class members, using the “best practicable” method, informing absent class members of an opportunity to opt out of the class action.

Class action settlements must receive court approval after a fairness hearing under Rule 23(e), and class members may object before the court issues a final judgment. Judgments rendered in certified federal class actions are binding on all members who do not opt out.

New York’s class action procedure under Article 9 follows a similar structure but applies more flexibly. Plaintiffs must demonstrate five elements: numerosity, commonality, typicality, adequacy and that a class action is a “superior” method of adjudication. Unlike Rule 23, Article 9 does not divide class actions into three categories, and courts generally apply a more liberal standard, resolving close questions in favour of certification.

After certification, notice in New York is discretionary rather than automatic, and opt-out rights are typically available to all class members regardless of the relief sought. Settlements also require court approval under CPLR 908, but historically some state courts enforced that rule only for certified classes – a split only recently settled by the New York Court of Appeals in Desrosiers v Perry Ellis Menswear, LLC, 30 N.Y.3d 488, 499 (2017), which held that notice and approval are required even for settlements that are reached before a ruling on a motion for class certification. Overall, while the procedural stages of filing, certification, notice, trial and settlement mirror the federal model, New York courts emphasise flexibility and access, whereas federal courts emphasise structure and judicial gate-keeping.

Standing is a constitutional prerequisite to invoking the jurisdiction of the courts. Article III of the US Constitution limits federal judicial power to “cases” and “controversies”, which requires a plaintiff to demonstrate (i) an injury in fact (ii) that is fairly traceable to the defendant’s conduct and (iii) likely to be redressed by a favourable decision (Lujan v Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)). The Supreme Court defined injury in fact as “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical” (id at 560). A mere interest in seeing the law obeyed or a generalised grievance about government action is not sufficient.

In 2016, the Supreme Court emphasised that a “concrete” injury must be “real, and not abstract”, though it need not be tangible (Spokeo, Inc. v Robins, 578 U.S. 330, 340 (2016)). Even where Congress creates statutory rights, plaintiffs must still show a concrete harm; “a bare procedural violation, divorced from any concrete harm” cannot satisfy the constitutional standing requirement (id at 341). In short, the injury-in-fact requirement serves as a fundamental separation-of-powers safeguard by ensuring that federal courts do not render advisory opinions but instead adjudicate genuine disputes involving real-world harm.

More recently, the Supreme Court's recent decision to dismiss the writ of certiorari in Laboratory Corporation of America Holdings v Davis, No 24-304 (U.S. June 5, 2025) leaves unresolved a pivotal issue in class action jurisprudence: whether federal courts may certify damages classes under Rule 23 that include uninjured class members. This uncertainty continues to fuel a split among the federal courts of appeals. The Ninth and Eleventh Circuits generally permit certification of such classes, even if they contain uninjured members, while the Second, Fourth and Eighth Circuits typically reject certification under these circumstances. The Supreme Court's dismissal of the writ of certiorari, without addressing the merits, effectively leaves standing the Ninth Circuit's approach in that particular case, thereby perpetuating this divide. Supreme Court Justice Kavanaugh’s dissent from the denial of certiorari, advocating for a more restrictive interpretation, underscores the potential for future clarification. Until the Court provides definitive guidance, the prevailing uncertainty complicates standing analyses in class actions regarding the inclusion of uninjured class members in a class.

In federal class action litigation, the treatment of class members and opt-out rights depends on the type of class certified under Rule 23(b). For damages actions certified under Rule 23(b)(3), class members are automatically included within the class unless they affirmatively opt out after receiving notice. This ability to “opt out” is rooted in due process principles, which require that absent class members be given a meaningful choice before being bound by a judgment for monetary relief. By contrast, Rule 23(b)(1) and (b)(2) classes – typically involving injunctive or declaratory relief – are generally mandatory, meaning that members do not have a right to opt out. Federal courts also require that the class be defined in a way that is ascertainable, and courts typically view a class of 50 or more as sufficiently numerous to justify a class action.

New York’s CPLR Article 9 adopts a more flexible and uniform approach. Unlike the federal rule, Article 9 does not divide class actions into categories, and courts generally treat all certified classes as opt-out actions, regardless of whether the relief sought is monetary or injunctive. Notice is discretionary, and courts may dispense with it altogether if the stakes are minimal or individualised notice is impracticable. New York courts also reject rigid formulations of ascertainability, allowing classes to be defined broadly, even through self-identification, so long as there is a reasonable method for determining membership at some later point. As a result, the default presumption in New York favours inclusion, with the burden placed on dissenting members to affirmatively remove themselves from the class.

The joinder of overlapping claims is an inherent feature of the class action. Because of the class action’s status as a vehicle that “enables a federal court to adjudicate claims of multiple parties at once, instead of in separate suits”, joinder is rarely a difficulty in class action (Shady Grove Orthopedic Assocs., P.A. v Allstate Ins. Co., 559 U.S. 393, 408 (2010)). Claims common to the class are litigated as one, on behalf of the entire class, without the need for formal joinder.

In both federal and New York state courts, judges have broad case management authority over class actions to ensure efficiency, fairness and protection of absent class members. Under Rule 23(d), federal courts may issue orders to define or amend the class, regulate notice to the absent class members, control the presentation of evidence, set discovery sequencing or require subclasses or bellwether proceedings. They may also decertify or modify a class at any time before final judgment under Rule 23(c)(1)(C). Federal judges frequently use phased discovery, bifurcation between certification and merits, and trial plans to manage complex or individualised issues. Settlements and dismissals require court approval under Rule 23(e), and the court may appoint or remove class counsel under Rule 23(g).

New York courts exercising authority under Article 9 enjoy comparable flexibility, though expressed less formally. Courts may redefine the class, order notice, appoint lead counsel, regulate discovery, consolidate related actions or structure subclasses as needed to promote fairness and efficiency. Like federal courts, they may amend or revoke certification at any stage. Under CPLR 908, settlements or discontinuances require judicial approval, even pre-certification settlements following Desrosiers v Perry Ellis, 30 N.Y.3d 488 (2017), ensuring the court remains an active guardian of absent class members’ interests. Overall, while federal practice is more rule-driven and New York’s more discretionary, both systems give judges sweeping managerial authority from certification through final resolution.

Federal class actions that are not dismissed in the early stages of litigation typically take between two and a half years to upwards of five years to resolve. However, hard-fought litigation through summary judgment or trial can take longer.

New York class actions are usually slightly quicker, and class actions that are not dismissed in the early stages typically take between two years to five years to resolve.

Among other things, the complexity of the claims, interlocutory appeals to appellate courts, stays and leadership disputes can lengthen the time to resolution.

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In general, US litigation at both the federal and state level is funded by the litigants. This is commonly referred to as the “American Rule”. It is only where a class action involves a statutory or contractual prevailing party fee-shifting provision, or where there is a finding that the losing party litigated in bad faith, that the losing party is required to pay the reasonable attorneys’ fees of the prevailing party.

Under Rule 54(d)(1) of the Federal Rules of Civil Procedure, prevailing parties in civil litigation may recover costs, but not attorneys’ fees. These costs may include fees of the clerk and marshal, fees for transcripts used in the case, printing and witness fees and disbursements, copying fees and docket fees. Some courts may also award electronic discovery costs. In settled cases, the settlement agreement will determine how, if at all, costs will be allocated among the parties. New York has a similar rule, codified at CPLR 8101, which provides for certain cost-shifting in favour of the prevailing party.

Third-party funding of class actions is permitted in the United States and New York. Third-party litigation funding is a well-established practice in the United States, and the rules regarding litigation financing for class actions are rapidly evolving. While some jurisdictions have implemented disclosure requirements, as of late 2025, New York courts do not have a formal statutory or court rule mandating the disclosure of third-party litigation funding agreements in class action litigation. But courts may order disclosure of such financing arrangements on a case-by-case basis.

Discovery and the attorney-client privilege in class actions is generally governed by the same rules and principles that normally apply in US civil litigation. Permissible discovery is quite broad and allows for use of a wide range of discovery mechanisms, including document requests, interrogatories, requests for admissions, and depositions of witnesses and parties. Discovery specifically related to the class certification requirements set forth in Rule 23 or Article 9 may be bifurcated or separated from merits discovery, but such bifurcation is not required. Most courts will permit discovery on the merits to proceed at the same time as class certification discovery.

In recent years, defendants in class action litigation have increasingly attempted to obtain discovery from absent class members, either in an effort to defeat class certification or for use at trial. However, absent class member discovery is rarely permitted because many courts properly treat absent class members as non-parties – see, eg, In re Petrobras Sec. Litig., 2016 WL 10353228, at *1 (S.D.N.Y. Feb. 22, 2016) (“[C]ourts are extremely reluctant to permit discovery of absent class members”).

Federal class action plaintiffs may seek different categories of relief depending on the type of class action certified under Rule 23(b). Under Rule 23(b)(1), which applies where individual litigation would risk inconsistent adjudications or impair the rights of absent parties, the remedy is typically unitary or indivisible, such as declaratory or structural relief that binds the entire class. Because the rights at issue are collective and not readily severable, monetary damages are not the primary focus; rather, the remedy is uniform resolution of a shared legal interest.

Rule 23(b)(2) class actions are designed for injunctive or declaratory relief, where “the party opposing the class has acted or refused to act on grounds that apply generally to the class” (Rule 23(b)(2)). These actions seek forward-looking remedies, such as orders compelling policy changes, halting discriminatory practices or clarifying legal rights. Monetary relief may be incidental but cannot predominate.

By contrast, Rule 23(b)(3) actions, commonly used in consumer, antitrust and securities cases, are expressly tailored for legal claims seeking monetary damages. Plaintiffs may seek compensatory, statutory or punitive damages, as well as restitution or disgorgement. Unlike Rule 23(b)(1) and (b)(2) class actions, Rule 23(b)(3) classes require notice and an opportunity to opt out, recognising that individual class members have a substantial personal stake in the monetary remedies at issue.

In class actions in federal court, any settlement (or dismissal) that would bind class members requires court approval under Rule 23(e). For settlements, courts typically engage in a two-step process: first granting preliminary approval of the proposed settlement and notice plan, then conducting a fairness hearing after class members receive notice and have an opportunity to object or opt out of the class. The court’s scrutiny focuses on whether the settlement is the product of “arm’s length” negotiation, and whether it is “fair, reasonable, and adequate” in light of the litigation risks, the relief offered and class member reaction. Rule 23(e)(2). A mediator’s involvement in reaching the settlement may support a court’s finding that the settlement was the result of an arm’s length negotiation, though it does not by itself relieve courts of their independent duty to assess the fairness and adequacy of a proposed settlement.

New York law is similar because, under Article 9, “[a] class action shall not be dismissed, discontinued, or compromised without the approval of the court” (CPLR 908). Therefore, New York state court judges also oversee and must approve any settlements or dismissals of class actions that would be binding on absent class members.

As for alternative dispute resolution (ADR) mechanisms, both federal and state courts increasingly employ mediation or neutral evaluation in class cases. In federal courts, courts often propose or order mediation at one or more stages (for example, post-discovery or after summary judgment motions) to help the parties determine whether they can reach a negotiated resolution. Participation is typically confidential, and settlements achieved with a mediator’s assistance tend to have additional persuasive weight in judicial review.

In federal class actions in New York, final judgments, whether following trial, summary judgment or settlement approval under Rule 23(e), are appealable as of right to the US Court of Appeals for the Second Circuit (28 U.S.C. Section 1291). Interlocutory appeals (ie, intermediate appeals before a final judgment) are more limited, but Rule 23(f) allows a party to seek discretionary appellate review of an order granting or denying class certification. The appellate court has “unfettered discretion” to accept or deny such petitions (Rule 23(f) advisory committee’s note to 1998 amendment). Beyond the Court of Appeals for the Second Circuit, further review by the Supreme Court is entirely discretionary via a petition for certiorari under 28 U.S.C. Section 1254; no class action litigant has an appeal as of right to the Supreme Court.

New York procedure is similar. In New York state court class actions under Article 9, a final judgment is appealable as of right to the Appellate Divisions of the Supreme Court. Orders that are final, “in effect determine[] the action” or affect substantial rights, such as approval or rejection of a settlement under CPLR 908, are also generally appealable as of right (CPLR Section 5701(a)). Appeals from class certification decisions are more complex: depending on how the order is structured, a party may appeal as of right if the order “necessarily affects a substantial right” (CPLR 5701(a)(2)), or else must seek permission to appeal via motion for leave. Further review by the New York Court of Appeals, the state’s highest court, is largely discretionary: the Court of Appeals may accept a case by leave of the Appellate Division or upon its own grant of permission. Only in rare circumstances – for example, a direct appeal where there is a constitutional question or a split among the intermediate Appellate Divisions – does a party gain access to the Court of Appeals as of right.

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A major recent reform is the 17 September 2025 policy statement of the US Securities and Exchange Commission (SEC) (Release No 33-11389), which changes the SEC’s policy to clarify that it will no longer consider whether a company has adopted a mandatory arbitration provision in deciding whether to accelerate the effectiveness of the company’s registration statement to publicly sell securities. This a major change that could have far-reaching implications by allowing public companies to avoid class actions.

The SEC’s previous position for decades had been that a company’s mandatory arbitration provision is considered an obstacle to accelerating the effectiveness of a registration statement, because mandatory arbitration provisions could:

• violate the anti-waiver provisions of Federal Securities laws (eg, 15 U.S.C. Sections 77n, 78cc(a)) by waiving the right to bring a class action in court; and
• harm the ability of investors to bring private securities claims because arbitration could prevent or increase the costs of class actions. This prior SEC policy deterred public companies from adopting mandatory arbitration provisions, because they did not want to risk any SEC delay or rejection of their registration statement to publicly sell securities. By changing this policy, the SEC has opened the door for public companies to avoid class actions in court – or any form of class action – by adopting an enforceable mandatory arbitration provision.

In announcing this new policy, the SEC’s new chairperson, Paul Atkins, explained that the SEC had determined to apply recent US Supreme Court precedent broadly to conclude that neither the anti-waiver provisions of the federal securities laws nor the increased costs of arbitration operate to prohibit enforcing a mandatory arbitration agreement against investors. Although this Supreme Court precedent whereby “applying the anti-waiver provisions did not involve the precise issue of [company] issuer-investor mandatory arbitration provisions” (where a public investor does not have the opportunity to negotiate or even sign the agreement), the SEC nevertheless decided to apply the precedent broadly to this context (id at 12).

Similarly, the SEC determined that a 2013 Supreme Court decision upholding a mandatory arbitration agreement and class action waiver in between credit card issuers and merchants, to bar antitrust class actions, should apply to the context of mandatory arbitration provisions for securities claims adopted by companies in selling their stock publicly (id at 15). The SEC reasoned that a higher (even prohibitive) cost of arbitration should not prevent the enforcement of an arbitration agreement, because the securities laws – like the antitrust laws – “do not guarantee an affordable path to the vindication of every claim” (id) (quoting American Express Co. v Italian Colors Restaurant, 570 U.S. 228, 233 (2013)).

Having determined that the securities laws and Supreme Court precedent do not bar mandatory arbitration provisions in a company’s governing documents, the SEC announced that it would now focus its decision on whether to accelerate the effectiveness of a registration solely on the accuracy of a company’s disclosures – not on the substance of what is disclosed. This development reflects a broader trend towards deregulation and a shift in the SEC’s approach to corporate governance. SEC Commissioner Atkins indicated that such policy changes are part of an initiative to make initial public offerings more attractive by reducing compliance burdens. The SEC’s stance suggests a preference for allowing companies greater flexibility in determining their dispute resolution mechanisms, including mandatory arbitration, without facing regulatory scrutiny or sanctions.

The SEC’s change in policy could cause many companies to adopt mandatory arbitration agreements (including class action waivers), because they no longer fear the risk that the SEC will hold up the effectiveness of their registration statements. If this causes many companies to adopt such provisions, it could cause a major reduction in class actions in the United States. Thus, this could prove to be one of the most significant class action developments in many years.

On the other hand, it is important to note that there remain state law and other obstacles to corporations forcing stockholders into mandatory arbitration and/or class action waivers. For example, Delaware, the state in which most US corporations are incorporated, requires that every company’s certificate of incorporation and/or by-laws must allow stockholders to bring claims “in at least 1 court in this State” (8 Del. C. Section 115(c) (2025)). This provision effectively bars a corporation incorporated in Delaware from enforcing mandatory arbitration provisions against stockholder or derivative claims. Similarly, mandatory arbitration agreements generally cannot be enforced retroactively or without proper documentation. Accordingly, this is a new development that all class action legal practitioners should monitor in the coming years.