Is Your Company Ready for a Class Action? A Checklist for Legal Departments

When a class-action complaint arrives, the clock is already running. Legal departments must work quickly to understand the allegations, preserve potentially relevant information, determine who within the company needs to be involved, and bring in trustworthy outside counsel, all while facing a deadline to respond.

That is not the ideal time to figure out where records are kept, who has access to them, or which outside resources the company may need. A relatively simple readiness plan can help legal teams move quickly when a class action is filed and spend those critical early days focused on the case rather than internal logistics.

Recognize the warning signs

Class-action risk can take shape well before a complaint is filed. Legal teams should address recurring issues early, as repeated complaints can easily trigger class-action lawsuits.

An increase in customer complaints about the same issue, for example, may deserve a closer look. So may multiple demand letters raising similar allegations or a regulatory inquiry involving a recurring business practice. Legal departments can also monitor class-action filings against companies offering similar products or services, which may provide an early indication of issues developing within their industry.

None of these developments necessarily means a class action is coming. But recognizing a pattern early gives the legal department time to understand the issue and consider whether the company needs to take a closer look before litigation is imminent.

Know who will lead the response

Before a lawsuit arrives, legal departments should identify someone to lead the company’s response. That person does not necessarily need to handle every aspect of the case, but that person should know who to bring in and when. Depending on the allegations, that could mean involving risk management, IT, records personnel, communications professionals, or the company’s insurance contact.

Some of the most important preparation involves knowing where information resides and how it will be preserved. Legal departments should have a process for implementing a litigation hold and understand who within the organization is responsible for potentially relevant records. It is also helpful to have an eDiscovery vendor identified and vetted before a large document collection becomes necessary.

The same advance planning should extend to outside counsel. Legal departments should understand whether their go-to litigation counsel has class-action experience and where those lawyers are admitted to practice. If a case is filed in another jurisdiction, preferred counsel may still be able to handle it with the assistance of local counsel, depending on that jurisdiction’s admission requirements. Knowing those capabilities and limitations in advance can make it easier to assemble the right team quickly.

Finally, the response plan should account for communications and insurance. Companies should know who will handle internal communications and respond to media inquiries, if necessary. If insurance coverage may apply, the appropriate person should have access to the company’s policies and understand any notice requirements.

The first 24 to 72 hours

Once a class action is filed or threatened, the legal department should assess the allegations and potential exposure as quickly as it reasonably can. Relevant evidence should be preserved, and any applicable insurance coverage and notice requirements should be reviewed. The company also needs to determine when a response is due.

Outside counsel should be engaged promptly. Class-action complaints can be lengthy, and counsel will need time to determine whether to answer the complaint or seek dismissal. Depending on when the legal department actually receives the lawsuit, some of the limited response period may already have passed.

This is also the time to bring in the appropriate people internally. Who needs to participate depends on the allegations, but legal departments should know how to quickly reach the people who control relevant records or systems, as well as anyone responsible for risk or communications.

Prepare for discovery before you are in discovery

Document discovery can be one of the most burdensome parts of class action litigation. Broad discovery requests can make a case difficult and expensive to defend even when the company has a strong position on the merits.

Good organization can make a meaningful difference. Internal policies and procedures should be readily accessible, as should record-retention schedules. If requested records no longer exist because they fall outside the company’s ordinary retention period, having documentation of that policy can help explain why.

Legal departments should also consider how the company would determine how many people were potentially affected by an alleged issue. That question can become important early in a case, including when a company is evaluating whether a state-court class action may be removed to federal court under the Class Action Fairness Act.

In practice, determining the potential size of a class may require the company to identify which records contain the relevant information and who can interpret them. Those questions are much easier to address when the legal department already understands how information is stored across the organization.

No company can prepare for every class action that might be filed against it. But it can avoid having to build its response process from scratch after a complaint arrives. Knowing who will take the lead, how the company will preserve and collect information, and which outside resources are available can give the legal team more time to focus on the case itself.