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The Incidence of Class Action Activity: Is Class Action Litigation Increasing?

Class Action Watch Fall 1998
October 01, 1998

We began our survey by asking: "How many putative class actions were pending in 1988 [and 1993 and 1998]? In answering this question, please include all suits in which the plaintiff purported to sue on behalf of a class, without regard to whether class certification was ultimately granted or denied." Respondents were asked to identify the number of such cases in state and federal courts, and then to break down the state cases by jurisdiction (Alabama, California, Florida, Louisiana, Ohio, Texas, and "Other"). Figure One sets forth the data from this question.

Among the respondents, the number of pending putative class actions in Texas state courts increased by 820 percent between 1988 and 1998. The number of such actions rose by 1042 percent in all state courts and by 338 percent in all federal courts during that same period.

To ensure that the increases in class action litigation we are seeing were not simply the result of a small number of outliers who experienced very significant spikes, we performed the following analysis:

*We counted the number of respondents who showed increases in class action litigation between 1988 and 1998, 1988 and 1993, and 1993 and 1998. In the 1988-1998 time period, 84 percent reported increases and none reported declines. In the 1988-1993 period, 48 percent reported increases and 16 percent reported declines. In the 1993-1998 time period, 82 percent reported increases and 4 percent reported declines. Therefore, most companies-not simply a small cluster of especially hard-hit companies-saw increases.

*We also looked at the figures for individual respondents who reported increases. For each relevant time period (1988 vs. 1998, 1988 vs. 1993, and 1993 vs. 1998) and court system (federal, state, Texas state), we calculated the median and mean increases in the number of cases for our respondents. The median figure and the mean figure for a given court system and time period were consistently about the same, with very little deviation. Moreover, we noticed that, for each year in each court, it was virtually alwaysd the case that respondent increases were quite similar. For example, in comparing 1993 and 1998 data for cases in state courts--a period during which we recorded an increase of 227 cases--two-thirds of the respondents witnessed an increase of seven cases or less and one-third witnessed an increase of 14-28 cases. Similarly, for Texas data during those same years--a period reflecting an increase of 71 cases--88 percent of the respondents showed an increase of six cases or less and 12 percent of the respondents showed an increase of 7-11 cases. In other words, no one company, or small group of companies was responsible for increases witnessed.

*We also sought to control for company growth in an effort to account for the fact that increases in class actions sometimes can result from increases in company growth and productivity or merger and acquisition activity. We found that revenues for the companies surveyed doubled on average between 1988 and January 1, 1998. This is considerably lower than the percentage increases in class action litigation.

In an effort to compare jurisdictions, we analyzed the rates of increase in putative class actions between state, federal, and Texas state courts for respondents. The results of that analysis are set forth in Figure Two and Figure Three. In Texas state courts, the rate of increase rose from 110 percent in the 1988/1993 time period to 338 percent in the 1993/1998 time period. For state courts nationwide, the rate of increase dropped somewhat, from 310 percent in the 1988/1993 time period down to 178 percent in the 1993/1998 time period. In federal courts, the rate of increase climbed from 54 percent in the 1988/1993 time period to 184 percent in the 1993/1998 time period. As Figure Four suggests, the Texas increases are reflected in the rise of certification rulings handed down by Texas appellate courts over the past few years.