Avoid the class action

Business owners often think of class-action lawsuits in terms of consumer issues such as deceptive practices or product defects. Two recent lawsuits from the sports world show that businesses or nonprofit organizations with more than a few employees, or ones that expose customers or consumers to possible injury, might also be vulnerable to class actions.

Class actions combine what could be a huge number of individual lawsuits into a much more efficient proceeding, and offer access to relief even when individual damages are small. But they can be tremendously costly to the party being sued.

Successful class actions have sometimes resulted in far greater combined monetary settlements or verdicts than separate lawsuits. Criticisms include that lawyers benefit from large fees while aggrieved plaintiffs receive small settlements.

The two sports lawsuits, in federal court in California, involve baseball and illustrate why employers and others should think more carefully about how they comply with government regulations, avoid personal injury liability or have any exposure to litigation that might involve a group of potential plaintiffs.

One is a well-publicized lawsuit regarding minimum wage and overtime for minor league baseball players under both the federal and state versions of the Fair Labor Standards Act (FLSA). In July, U.S. Magistrate Judge Joseph C. Spero issued a 100-page opinion denying class-action certification, but left open reconsideration.

A point that emerges in his order on the plaintiffs' request for reconsideration is that an FLSA case will be very difficult to prove without detailed, contemporaneous records of hours worked. The technical requirements of an FLSA case will be difficult to meet if the individual players must assert their cases one-by-one.

The second possible class action, which also had been pending in the U.S. District Court for the Northern District of California, involved an attempt at certifying as a class spectators injured at major league ballparks. The trial court, however, dismissed the case on several legal grounds. As to the class action status, the court concluded that the statistical probability that one of the plaintiffs would be struck by a ball or bat was so small that the plaintiffs did not have standing.

As shown in both cases, class-action lawsuits are not automatic, and must meet certain tests. Among them is that the class can be defined, that its members have matters of law and fact in common and that the class has a sufficient (but unspecified) number of members. These cases also demonstrate that creative litigators can pursue this form of lawsuit in some unconventional places.

—Jim Juliano